A home loan isn’t just a path to owning property — it also comes with tax benefits that can meaningfully reduce your annual tax outgo. But with the shift toward the new tax regime as the default option, many buyers aren’t sure which benefits still apply to them. Here’s a clear breakdown of what’s actually available in 2026.
The Two Main Deductions: Section 24(b) and Section 80C
Section 24(b) — Interest Deduction Covers the interest component of your home loan EMI. For a self-occupied property, you can claim up to ₹2 lakh per year under the old tax regime. If the loan was taken for repair, renewal, or reconstruction rather than purchase or construction, the cap drops to ₹30,000 per year.
Section 80C — Principal Repayment Deduction Covers the principal component of your EMI, along with stamp duty and registration charges in the year they’re paid. The maximum deduction is ₹1.5 lakh per year under the old tax regime — note that this limit is shared across all Section 80C investments (PF, ELSS, insurance premiums, etc.), not exclusive to your home loan.
Important: This Changes Significantly Under the New Tax Regime
This is the single most important thing for buyers to understand in 2026: the new tax regime, now the default option, does not allow Section 24(b) or Section 80C deductions for a self-occupied property. If you don’t actively choose the old tax regime at the time of filing, you lose access to both of these deductions on your primary residence.
For a let-out (rented) property, the picture is different — interest paid is deductible against the rental income under both tax regimes, though under the new regime, any resulting loss cannot be set off against your salary or other income in the same way it can under the old regime.
Practical implication: If home loan tax benefits are a meaningful part of your financial planning, you’ll likely need to opt for the old tax regime when filing your return — this is worth running through with a tax advisor or CA based on your overall income and other deductions, since the right regime depends on your complete financial picture, not home loan benefits alone.
Joint Home Loans: A Genuine Tax Advantage
If you take a home loan jointly — with a spouse, for example — and both of you are co-owners of the property, each borrower can claim these deductions separately (subject to each person opting for the old tax regime):
- Up to ₹2 lakh each under Section 24(b) — a combined ₹4 lakh for the household
- Up to ₹1.5 lakh each under Section 80C — a combined ₹3 lakh for the household
This is one of the most effective, legitimate ways for a household to maximize home loan tax benefits, provided both co-owners have sufficient individual taxable income to actually use the deduction.
What Happens If You Sell Early?
It’s worth knowing this before you plan around these deductions: if you sell the property within 5 years from the end of the financial year in which you took possession, any Section 80C deductions you claimed on principal repayment get reversed and added back to your taxable income in the year of sale. There’s no equivalent clawback for Section 24(b) interest deductions, even on early sale.
The New Income Tax Act, 2025
Buyers may have also come across mentions of the new Income Tax Act, 2025, which came into effect from April 1, 2026, replacing the older Income Tax Act, 1961. For home loan purposes, this is largely a continuity update — the core deduction provisions (Section 24(b) interest, Section 80C principal, the regime-based restrictions, and the set-off rules) remain unchanged in substance, just recodified under the new Act.
A Quick Planning Checklist
- Confirmed whether the old or new tax regime makes more sense for your overall income, not just home loan benefits
- Factored in whether the property is self-occupied or let-out, since the rules differ meaningfully
- Explored joint ownership and joint loan structuring if buying with a spouse, for combined deduction benefits
- Kept stamp duty and registration receipts for the Section 80C claim in the year of payment
- Discussed the 5-year holding period implication with a tax advisor if an early sale is a possibility
Final Word
Home loan tax benefits remain genuinely valuable, but they now come with a conscious choice — opting for the old tax regime — that wasn’t previously necessary. Given that the right regime depends on your complete income and deduction picture, it’s worth a proper conversation with a CA or tax advisor before filing, especially in the year you take possession. If you’d like help understanding the overall cost picture of a specific property purchase, our team is happy to help.
